ICE cotton recovers on short covering, gains capped by macro worries

ICE cotton futures recovered due to technical buying and short covering on yesterday. Although, gains were capped by stronger US dollar and persistent inflation worries driven by rising global energy prices which continued to weigh on market sentiment throughout the session. US dollar also made US cotton purchase expensive for overseas buyers.

The most traded May 2026 contract settled at 67.62 cents per pound, up 0.44 cent. The market indicated recovery despite underlying macroeconomic pressure. During the session, the contract touched an intraday low of 66.65 cents, marking its lowest level since March 16, reflecting early weakness before recovery.

The strengthening US dollar index added further pressure, as it makes US cotton more expensive for international buyers, thereby reducing export competitiveness.

The trading session remained highly volatile and mixed, with prices dipping initially and then recovering due to technical buying and short covering.

Technically, the market is showing signs of stabilisation as the May contract has managed to close above its 200-day moving average in 5 out of the last 7 sessions, which is considered a supportive signal for trend recovery.

Trading activity remained subdued with total volume at 52,002 contracts, the lowest in nearly one month, indicating reduced participation and lack of strong conviction among traders. As per ICE data released on March 23, the certified stock of deliverable No.2 cotton remained unchanged at 115,640 bales, indicating a neutral supply-side factor with no fresh pressure from inventories.

Market direction was influenced by uncertain geopolitical developments, particularly conflicting signals around US–Iran diplomacy and fluctuations in crude oil prices, which impacted broader commodity sentiment.

Rising crude oil and energy prices are increasing concerns that inflation will remain elevated, which could spread across commodities and impact cotton pricing dynamics.

According to market analysts, the inflation is unlikely to decline significantly, and sustained higher costs may start affecting cotton demand globally.

Elevated energy prices are expected to increase costs across the entire cotton supply chain, including production, processing, and transportation, which may reduce mill buying interest.

Financial markets have shifted expectations, now indicating no interest rate cuts by the US Federal Reserve in 2026, whereas earlier there were expectations of at least two rate cuts before escalation of Middle East tensions.

Although US President Donald Trump postponed planned strikes on Iranian energy infrastructure, market participants remained sceptical about any quick resolution to Middle East tensions, keeping uncertainty elevated.

The recent upward movement in cotton prices towards 68–69 cents followed by a pullback is being viewed as a normal technical correction, after a sharp rally over the past few weeks.

This morning (Indian Standard Time), ICE cotton for May 2026 was traded at 68.26 cents per pound (up 0.64 cent), cash cotton at 65.62 cents (up 0.44 cents), the July 2026 contract at 70.31 cents (up 0.54 cent), the October 2026 contract at 71.77 cents (up 0.46 cent), the December 2026 at 72.61 cents (up 0.33 cent) and the March 2027 contract at 73.60 cents (up 0.25 cent)). A few contracts remained at their previous closing levels, with no trading recorded so far today.

ICE cotton futures rebounded on technical buying and short covering, with the May 2026 contract settling at 67.62 cents/lb.
However, gains were capped by a stronger US dollar and inflation concerns linked to rising energy prices.
Low trading volumes and geopolitical uncertainty kept sentiment cautious despite signs of technical stabilisation.

Fibre2Fashion News Desk (KUL)